This Week in Fintech (5/1)

This Week in Fintech (5/1)

Hello Fintech Friends,

Fintech news seems to be the only volatility-free asset these days - it grows predictably week over week over week. Please find another week’s banking and fintech news below.

Quote of the week

“Anyone can launch a bank account integrated into their mobile app. If I raise a large venture check to build a neobank, I can pull in pre-paid cards, deposits, investments, and insurance products without much fanfare. It is no longer unbearably hard. This means supply goes up, price goes down, and features are commoditized. And you compete with the tech companies, the global banks (JPM) and asset managers (BlackRock), and the Chinese super apps, because they are doing it too.”
  • Lex Sokolin, Fintech Blueprint (source)

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Open role spotlight

TrueAccord, a digital debt collection agency working to humanize the workouts process,is hiring a VP of Product and a GM of Lending. Reach out to Ohad Samet for more details.

Read of the week

Re-reading US Real-Time Payments -- a Finastra whitepaper from Feb. 2019 -- reminded me that, at that time, The Clearing House’s Real Time Payments system was projected to achieve penetration into total demand deposit accounts of over 90% by EOY 2020.

This meant that, by the end of the year, close to all bank accounts in the US would be enabled to use payment rails that allow funds to be instantly transferred, leaving ACH in the dust once and for all. What kind of innovation could be enabled with instant peer-to-peer or account-to-account funding? What kind of harms, especially to those most vulnerable, could we offset? When banks and fintechs finally achieve RTP ubiquity, it will open the door to payments innovation.

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Banking and Credit Cards

As consumers draw down on savings and unemployment ticks steadily upwards, major credit card issuers such as Discover and Synchrony have started lowering credit limits. Wells Fargo, meanwhile, will no longer take applications for home equity lines of credit, though mortgage lenders like Freedom Mortgage lean into the refinancing boom.

Changing behaviors have brought a 40% jump in Mastercard contactless payments, with a corresponding 60% drop in cash withdrawls in the UK and 60% growth in digital onboarding for Emirates NBD Bank in the UAE.

JP Morgan has partnered with supply chain financer Taulia to offer clients a new trade financing service. Barclays CEO Jes Staley predicts that bank branches will return.

Royal Bank of Scotland is closing Bó, the neobank it launched only six months ago. NatWest, RBS, and Ulster Bank in the UK have launched companion cards for vulnerable customers to give to trusted shoppers (ie: authorized users).

The Federal Reserve will lift the six-per-month limit on savings account transactions.

The UK’s Banking Competition Remedies board is evaluating how to distribute £100 million it granted to Metro Bank and Nationwide in bail-out funds which both banks returned when they didn’t meet required conditions. Meanwhile, the Financial Conduct Authority will delay implementation of KYC rules by six months to minimize business disruptions.

China has started a major pilot of its state-run digital currency in four cities, with incentives such as subsidized transportation, and Australian Eftpos Payments is trialing a digital identity service.

Indian banks are bracing for a new wave of defaults due to coronavirus and banks between Mexico, Peru, and Brazil are joining forces to enable instant payments.

Lastly, the World Bank has predicted that international remittance volumes will drop by 20% to 25% in 2020, which could significantly affect the new spate of cross-border money transfer services.

From Tomas Vysny - Salary Finance: A Killer Product for European Lending?

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Fintech

This week’s most prominent fintech news comes from a non-fintech company (a routine event as embedded fintech grows): Shopify, which launched its online consumer shopping app Shop this week. The marketplace creates a captive customer base for its Shop Pay checkout product. The company also launched Shopify Capital to fund “the next million independent businesses” using its platform, and is investing in its Libra membership. Does the company plan to do more than use Libra as a form of payment? Will it offer Libra-denominated loans at a discount to dollars, or provide a Libra merchant rewards network (similar to Dosh)?

Facebook is also making significant strides into Indian payments, quickly. A week after its $5.7 billion investment in Reliance Jio, whose fintech forays have historically been restricted to point of sale systems, news is emerging that the social media giant is evaluating lending and peer-to-peer transactions on WhatsApp.

Plaid launched instant in-app Payment Initiation in the UK. Brex launched a new corporate credit card with a 1-day repayment cadence for young startups. African payments infrastructure startup Flutterwave launched a SMB e-commerce portal: a smart strategy to boost its payment revenues via captive online sales (and echoing Shopify’s roadmap).

Galileo, recently acquired by SoFi, announced its expansion into Mexico via strategic partnership with Mexican neobank Klar and Mastercard Certification. As far as I’ve seen, this is the first banking-as-a-service business that has moved across regulatory jurisdictions. UK wealth management app Ikigai has partnered with TruNarrative as it readies for launch.

Trade finance technology platform Surecomp has launched an open banking API sandbox for banks to build on. Dharma, a decentralized finance startup backed by Coinbase, launched a Twitter-based payments system. Nutmeg announced integration with Yolt, Emma and Money Dashboard PFM tools.

In coronavirus response news, Paypal will waive check cashing fees for government stimulus checks and Paytm in India is building a contactless solution for restaurant payment in lockdown.

Dv01 data reveals that late payments on online loans are continuing to spike higher and higher. App downloads for neobanks have dropped 23% in the UK in March due to the economic slowdown. Indonesia’s fintech lending market has also seen early signs of distress.

BMO Harris Bank and 1871 are partnering to launch a women’s fintech mentoring program.

Eight executives have left neobank Revolut in the last month. A KPMG audit was unable to verify Wirecard’s third party profits, sending the stock spiraling, and overshadowing this week’s stampayGo launch. Yieldstreet is being pressed by consumer groups to explain missing payments and fraudulent investments, losing Blackrock as a partner.

The Financial Data Exchange, an open banking API standard in the US, surpassed 100 members this week - adding new members including PAi Retirement Services, PayPal, and Sovos. And Ant Financial’s MyBank announced over 20 million SME customers as of 2019.

FIS announced its corporate investing arm, FIS Ventures, with $150 million in new capital.

Screenshots of Plaid’s instant payment initiation for apps (source).

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Financings
  • Business payments processor AvidXchange added an additional $128 million to the $260 million funding round it closed in January.
  • Millennial banking app Stash raised a $112 million Series F from LendingTree.
  • Cross River Bank, which provides the banking license and infrastructure that underlies many fintechs, raised a $100 million Series C.
  • Indian super-fintech app Paytm is in talks with Microsoft to raise $100 million in new capital.
  • Oriente, a Hong Kong-based fintech that builds infrastructure for digital credit and financial services for underserved markets, raised a $50 million Series B.
  • Finom, a business-focused neobank based in the Netherlands, raised a €6.5 million seed round.
  • TransFicc, an API for connecting to multiple trading venues, raised a £5.7 million Series A.
  • Wise, a challenger bank for small businesses that bundles Stripe banking and payment services, raised $5.7 million.
  • Financial services fraud detection platform Resistant AI raised a $2.75 million seed round.
  • Chip, a budgeting and savings app in the UK, crowdfunded a £2.6 million fundraise.
  • Nigerian open banking API solution Okra raised a $1 million pre-seed.
  • Bundle, an African peer-to-peer payments and crypto app, raised a $450 thousand pre-seed to build its flagship product.
  • Egyptian fintech fund Disruptech invested in Khazna, which provides mobile financial services to the unbanked, and Brimore, a distribution technology platform.
  • Tradeteq raised seed funding from the Singapore Central Bank to build a quantum computing-based credit scoring tool for companies.
  • Swiss digital asset firm Taurus raised a Series A.
Exits and M&A
  • Augeo, an engagement solutions platform for customers, employees, and members, will acquire Empyr, a merchant rewards network leveraged by many card issuers.
  • European stock exchange Euronext will acquire 70% of the shares of Danish trading utility provider VP Securities from its owners, including the Danish Central Bank, Danske Bank, Nykredit, Nordea and Jyske Bank.

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Deeper Reads

CB Insights Breakdown of Eight Fast-Growing Personal Finance Apps

5 Uses For Google Pay In Singapore You Might Not Know About

Is Brazil the next big thing in fintech?

Is Libra 2.0 good enough?

Buy now, paying later startups are surging. But Affirm CEO Max Levin says the industry will see a shakeout as the pandemic hits borrowers.

Unifi Money: No one needs another Neobank — so why are we launching one?

How One Bank-Fintech Partnership is Working for Small Businesses

Balancing KYC Regulation and COVID-19 Relief in Emerging Markets

My experience with the CARES Act was frustrating, confusing and unfair

How we optimized finding similar assets for tax-loss harvesting

Harit Talwar on the Future of Consumer Banking

Covid-19 will decimate fintechs, but those that survive will prosper

Covid-19: fintech funding already contracting - Forrester

Baby shark now has a hand-washing video